A pair of new data reports have found a vibrant housing market during May, despite record-level inventory shortages.
According to Redfin, home prices rose 6.8 percent to a median sale price of $288,000 last month, a 7.5 percent year-over-year increase. The spike in prices was matched by a 10.9 percent year-over-year decline in the number of houses for sale. Redfin estimated there is a 2.7-months inventory, the lowest supply since the company began tracking the market in 2010. Redfin also found that the typical home that sold in May went under contract in 37 days, breaking the previous record of 40 days set in April, while more than one-quarter of homes sold above their list price, the highest percentage Redfin has recorded. The median sale-to-list price ratio set another record, hitting 95.4 percent in May.
“There is still a lot of momentum in home prices in many metros, not only on the coasts but also in places like Buffalo, Grand Rapids and Omaha,” said Redfin’s chief economist Nela Richardson. “Strong local economic growth and burgeoning demand from older millennials are accelerating home-price growth in this very competitive, low-inventory pre-summer market. The Federal Reserve’s latest announcement to raise short-term rates will have very little effect on buyer demand or on the overall housing market. If anything, it may motivate buyers to make their purchases sooner rather than later.”
Separately, RE/MAX reported home sales in May were up 20.6 percent from April and up 4.3 percent from May 2016. This was the strongest May in terms of home sales in the nine years that RE/MAX has been tracking the market.
Also setting a record for RE/MAX was the average number of days on the market—51, a new low—and the inventory availability—2.6 months, another low. RE/MAX determined that last month’s median sales price was $232,500, second only to the August 2008 peak of $236,062.
“In May, we saw an uptick of both loan applications and home sales, which is encouraging in terms of more people getting into the market for homes,” said Adam Contos, RE/MAX co-CEO. “We don’t expect that the Federal Reserve’s announcement on Wednesday to raise interest rates a quarter of a point will greatly affect the market’s momentum. But housing demand only intensifies the tug-of-war with tight inventories driving prices up.”
